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Crippin – ancillary dwelling qualified for principal private residence relief

24 November 2021. Published by Constantine Christofi, Senior Associate

In Roger Crippin v HMRC [2021] UKFTT 0351 (TC), the First-tier Tribunal (FTT) held that a three-bedroom annex to a main property qualified for principal private residence (PPR) relief.

Background

Roger Crippin (the Appellant) purchased his home and an annex in one transaction. He converted the annex into a flat with three bedrooms. The flat was capable of being a separate dwelling and had a separate entrance. It was connected to the main property by a first-floor balcony. The main house and annex were so close that you could see into each property from the other.

Once converted, family friends informally occupied the annex, paying contributions for running expenses, although there was no formal letting agreement. Throughout the relevant period, the Appellant's family had unfettered access to the annex and on occasion stayed in the property. They also kept some of their belongings inside the annex. The Appellant's parents also stayed at the property overnight when the family friends were away.

The annex was later marketed and let as a holiday let. This was within the final 36 months of ownership prior to the Appellant selling the annex to his partner, with whom he shared his home. The Appellant did not report the disposal of the annex for capital gains tax (CGT) purposes. 

HMRC assessed the disposal of the annex to CGT tax. The Appellant appealed the assessment on the basis that it formed part of his principal private residence and therefore qualified for PPR relief.

FTT decision

The appeal was allowed.

The FTT concluded that a physically separate entity could form part of a main residence following Lewis (Inspector of Taxes) v Lady Rook [1992] STC 171.

In deciding whether the annex formed part of, and was "ancillary to", the Appellant's main residence, the FTT took into account the fact that the family had kept some of their belongings in the property for the whole period in which it was occupied by friends and had let family members including the Appellant's grandparents stay in the property. In the opinion of the FTT, this was sufficient to establish that the annex was occupied as part of the Appellant's main residence, despite being a dwelling house in its own right and separate to the main property.

Comment

This decision demonstrates the importance of retaining access to, and personal use of, any properties developed "within the curtilage" of a taxpayer's primary residence, for the purpose of PPR relief. 

The FTT found that, the annex only formed part of the main residence until the holiday letting began to be advertised. The friends had used it on an informal basis and that did not prevent it being part of the main residence and PRR was therefore available. However, from the time it was advertised it could not be regarded as part of the Appellant's main residence.

This decision, together with the Court of Appeal's decision in Lewis, provide helpful guidance to taxpayer's who wish to claim PPR relief when disposing of separate properties which are ancillary to a main residence.

The decision can be viewed here.